resolute forest products q2 2018 results · q2 2017 restructuring fx sales price volume costs...
TRANSCRIPT
AUGUST 2, 2018
RESOLUTE FOREST
PRODUCTS
Q2 2018 RESULTS
August 2, 2018 2RFP Q2 2018 RESULTS
CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING INFORMATIONStatements in this presentation that are not reported financial results or other historical information of Resolute Forest Products Inc. (with itssubsidiaries and affiliates, “we,” “our,” “us” or the company”) are "forward-looking statements" within the meaning of the Private Securities LitigationReform Act of 1995. They include, for example, statements made in the Outlook slide of this presentation and statements relating to our: efforts andinitiatives to reduce costs and increase revenues and profitability; business and operating outlook; assessment of market conditions; growthstrategies and prospects, and the growth potential of the company and the industry in which we operate; liquidity; future cash flows; and strategiesfor achieving our goals generally. Forward-looking statements may be identified by the use of forward-looking terminology such as the words“should,” “would,” “could,” “will,” “may,” “expect,” “believe,” “anticipate,” “attempt,” “project” and other terms with similar meaning indicating possiblefuture events or potential impact on our business or our shareholders.
The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance. Thesestatements are based on management's current assumptions, beliefs and expectations, all of which involve a number of business risks anduncertainties that could cause actual results to differ materially. The potential risks and uncertainties that could cause the company's actual futurefinancial condition, results of operations and performance to differ materially from those expressed or implied in this presentation include, but arenot limited to, the impact of: developments in non-print media, and the effectiveness of our responses to these developments; intense competition inthe forest products industry; any inability to offer products certified to globally recognized forestry management and chain of custody standards; anyinability to successfully implement our strategies to increase our earnings power; the possible failure to successfully integrate acquired businesseswith ours or to realize the anticipated benefits of acquisitions, such as Atlas Paper Holdings, Inc. and its subsidiaries, or divestitures or otherstrategic transactions or projects, such as our Calhoun (Tennessee) tissue operations; uncertainty or changes in political or economic conditions inthe United States, Canada or other countries in which we sell our products; global economic conditions; the highly cyclical nature of the forestproducts industry; any difficulties in obtaining timber or wood fiber at favorable prices, or at all; changes in the cost of purchased energy and otherraw materials; physical and financial risks associated with global, regional and local weather conditions, and climate change; any disruption inoperations or increased labor costs due to labor disputes; difficulties in our employee relations or retention; disruptions to our supply chain,operations or the delivery of our products; cybersecurity risks; risks related to the operation and transition of legacy system applications; negativepublicity, even if unjustified; currency fluctuations; any increase in the level of required contributions to our pension plans, including as a result ofany increase in the amount by which they are underfunded; our ability to maintain adequate capital resources to provide for all of our substantialcapital requirements; the terms of our outstanding indebtedness, which could restrict our current and future operations; losses that are not coveredby insurance; any additional closure costs and long-lived asset or goodwill impairment or accelerated depreciation charges; any need to recordadditional valuation allowances against our recorded deferred income tax assets; our exports from one country to another country becoming orremaining subject to duties, cash deposit requirements, border taxes, quotas or other trade remedies or restrictions; countervailing or anti-dumpingduties on imports to the U.S. of most of our paper products and substantially all of our softwood lumber products produced at our Canadian mills;any failure to comply with laws or regulations generally; any additional environmental or health and safety liabilities; any violation of trade laws,export controls or other laws relating to our international sales and operations; adverse outcomes of legal proceedings or disputes in which we areinvolved; the actions of holders of a significant percentage of our common stock; and the potential risks and uncertainties described under theheading "Risk Factors" in Part I, Item 1A of the company's annual report on Form 10-K for the year ended December 31, 2017.
All forward-looking statements in this presentation are expressly qualified by the cautionary statements contained or referred to above and in thecompany's other filings with the U.S. Securities and Exchange Commission and the Canadian securities regulatory authorities. The companydisclaims any obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events orotherwise, except as required by law.
All figures in US$ unless otherwise noted
• Q2 GAAP net income of $72 million or $0.77 per diluted
share
– Q2 net income of $66 million or $0.71 per diluted share excluding
special items
• Adjusted EBITDA of $172 million, up 59% from first
quarter
• Debt repayment of $105 million; liquidity at $517 million
• Supercalendered paper cash duty deposits of $60 million
to be returned with interest
August 2, 2018 3RFP Q2 2018 RESULTS
Q2 2018 FINANCIAL HIGHLIGHTS
Adjusted EBITDA and Liquidity are non-GAAP financial measures. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
August 2, 2018 4RFP Q2 2018 RESULTS
Q2 2018 OVERVIEWAdjusted EBITDA : Q2’18 vs. Q1’18
• Higher selling prices across all segments
• Freight rate pressures persisted in Q2
• Calhoun’s tissue operations included in tissue segment starting in Q2
108
172
Q1 2018 FX Sales price Volume Costs SG&A Freight CalhounTissue
Q2 2018
1
(1)
6
58 5
(5)
108
172
Q1 2018 Market pulp Tissue Woodproducts
Newsprint Specialtypapers
Corporate Q2 2018
25
11
9
123
(5)
Adjusted EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures
August 2, 2018 5RFP Q2 2018 RESULTS
Q2 2018 OVERVIEW
83
172
Q2 2017 Market pulp Tissue Woodproducts
Newsprint Specialtypapers
Corporate Q2 2018
25
34
25 12
(2)
(5)
Adjusted EBITDA : Q2’18 vs. Q2’17
Adjusted EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
• Restructuring: elimination of fixed costs due to capacity closures in paper segments
• Higher selling prices: wood 33%; pulp 18%; newsprint 15%; specialty 8% vs Q2 2017
• Costs: higher market-related fiber costs / Timing of scheduled outages
• Freight: 15% ($10mm due to rate )
83
172
Q2 2017 Restructuring FX Sales price Volume Costs SG&A Freight CalhounTissue
Q2 2018
145 5
(26)
(15)
(16)
5
(4)
(5)
August 2, 2018 6RFP Q2 2018 RESULTS
MARKET PULP
1. EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
2. The “all-in” cash cost is the total cost, excluding depreciation and amortization, of each ton shipped (cost of sales, distribution costs, and selling, general and administrative
expenses).
10091 92 94
10089 91
108
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Inventory (000's mt)
Global chemical pulp shipments ↑ 3% in Q2
vs. 2017– China ↑ 12%; Western Europe ↑ 3%;
North America ↓ 5%;
– ↑ 3% for softwood and hardwood
Q2 Transaction price ↑ $37/mt vs. Q1;
↑ $154/mt since beginning of 2017
Q2 Shipments ↓ 9k mt vs. Q1
Q2 Cash cost2 ↑ $10/mt vs. Q1
Inventory build for strategic project at
Saint-Félicien
(US$mm) Q2 2018 Q1 2018
Sales 264 257
Operating income 41 33
EBITDA1 49 40
Shipments (000’s mt) 353 362
353
747
350
400
450
500
550
600
650
700
750
800
300
320
340
360
380
400
420
440
460
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
$/m
t
00
0's
mt
shipments average transaction price (right-hand scale)
August 2, 2018 7RFP Q2 2018 RESULTS
TISSUE – Q2 2018 INCLUDES CALHOUN FOR FIRST TIME
1. EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
23
1,551
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
0
5
10
15
20
25
30
35
40
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
$/s
t
00
0's
st
shipments average transaction price (right-hand scale)
U.S. consumption ↑ 1.6% vs. 2017
‒ Away-from-home shipments ↑ 2.7%
‒ At-home shipments ↑ 1.4%
Including Calhoun’s Q1 results:
‒ Q2 tissue sales ↑ 5% vs. Q1
‒ Q2 converted product shipments
↑ 20% vs. Q1
(US$mm) Q2 2018 Q1 2018
Sales 35 22
Operating loss (10) (1)
EBITDA1 (5) -
Shipments (000’s st) 23 15
4
5
8 8
11
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Inventory (000's st)
FloridaCalhoun
11
8 8
August 2, 2018 8RFP Q2 2018 RESULTS
WOOD PRODUCTS
1. EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
2. Seasonally adjusted annual rate.
494
514
100
150
200
250
300
350
400
450
500
550
400
450
500
550
600
650
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
$/m
bf
00
0's
mb
f
shipments average transaction price (right-hand scale)
121 124
147
125 122 124140
128
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Inventory (000's mbf)
250
300
350
400
450
500
550
600
650
700
750
8002x4 -RL #1-2 KD GL 2x4x8 Stud KD GL
Q2 2018
(US$mm) Q2 2018 Q1 2018
Sales 254 209
Operating income 79 53
EBITDA1 86 61
Shipments (mmbf) 494 455
Q2 SAAR2 for U.S. housing starts ↓ 4% vs. Q1; ↑ 7%
vs. Q2 2017 ‒ Multi-family starts ↓ 16%, single-family housing starts
unchanged vs. Q1
Q2 Transaction price ↑ $55/mbf vs. Q1; ↑ $128/mbf
vs. Q2 2017
Q2 Shipments ↑ 39 mmbf vs. Q1
Q2 Cash cost ↑ $15/mbf vs. Q1
August 2, 2018 9RFP Q2 2018 RESULTS
NEWSPRINT
1. EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
105 105 107114
98
78
9385
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Inventory (000's mt)
393
584
300
350
400
450
500
550
600
200
300
400
500
600
700
800
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
$/m
t
00
0's
mt
shipments average transaction price (right-hand scale)
North America:‒ Demand ↓ 8% vs. 2017; publishers ↓ 9%
‒ Production ↓ 6% vs. 2017
‒ Shipment-to-capacity ratio of 96%
World demand ↓ 9% vs. 2017
Q2 Transaction price ↑ $26/mt vs. Q1
‒ ↑ $75/mt vs. Q2 2017
Q2 Shipments ↑ 38k mt vs. Q1
Q2 Cash cost ↓ $28/mt vs. Q1
(US$mm) Q2 2018 Q1 2018
Sales 230 198
Operating income (loss) 18 (4)
EBITDA1 35 12
Shipments (000’s mt) 393 355
August 2, 2018 10RFP Q2 2018 RESULTS
SPECIALTY PAPERS
1. EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
2. Supercalendered.
75
92
100
9386
66 68 70
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Inventory (000's st)
275
701
450
500
550
600
650
700
750
200
250
300
350
400
450
500
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
$/s
t00
0's
st
shipments average transaction price (right-hand scale)
North American demand ↓ 4% in uncoated
mechanical grades in Q2 vs. 2017– Standard papers ↓ 10%; SC2 ↑ 2%
– Shipment-to-capacity ratio of 91%
North American coated mechanical grades: – Demand ↓ 5%; Production ↓ 16%
– Shipment-to-capacity ratio of 94%
Q2 Transaction price ↑ $26/st vs. Q1
Q2 Shipments ↓ 4k st vs. Q1
Q2 Cash cost ↓ $13/st vs. Q1
(US$mm) Q2 2018 Q1 2018
Sales 193 188
Operating income (loss) 4 (7)
EBITDA1 16 5
Shipments (000’s st) 275 279
August 2, 2018 11RFP Q2 2018 RESULTS
TRADE DUTIES
Duty
Duty Cash Deposits (US$mm) Current Duty Rate
StatusDate
Started
Estimated
Annual1
Cumulative
as of
6/30/2018
RFP Average2
Softwood Lumber
CVD3 4/28/17 65 50 14.70% 14.19% Chapter 19 NAFTA / WTO4 recourses
Softwood Lumber
ADD5 6/30/17 15 17 3.20% 6.04% Chapter 19 NAFTA / WTO recourses
Supercalendered
Paper CVD8/3/15 N/A 60 N/A N/A
CVD order revoked on 7/6/18;
$60mm previously paid will be
returned with interest in the coming
months
Uncoated
Groundwood Paper
CVD
1/16/18 20 6 4.42%6 6.53%Preliminary rate remained in effect
until 5/16/18; Final rate and injury
determination expected in September
Uncoated
Groundwood Paper
ADD
3/19/18 0 0 0%6 22.16%Final rate and injury determination
expected in September
Total 100 133
1. Based on our current operating parameters and duty rates for full 12 months.
2. Average of companies subject to duty.
3. Countervailing duty.
4. North American Free Trade Agreement / World Trade Organization.
5. Anti-dumping duty.
6. Preliminary rate.
August 2, 2018 12RFP Q2 2018 RESULTS
P&LSelected financial information
Q2 20181 vs Q1 2018 vs Q2 2017
Net income2
$66mm+$49mm +$69mm
Sales
$976mm+12% +14%
EPS2
$0.71+$0.53 +$0.74
Adjusted EBITDA3
$172mm+59% +107%
Special items affecting net income (pre-tax)
Q2 2018
- $12mm non-operating pension and OPEB4
credits
- $4mm net gain on disposition of assets
Shipments
353
494
393
275
23
10
15
20
25
30
35
40
150
200
250
300
350
400
450
500
550
Market pulp 000's mt Wood products 000's mbf
Newsprint 000's mt Specialty papers 000's st
Tissue 000's st (right-hand scale)
Augusta PM1: (-190k mt)
Mokpo: (-200k mt)Thorold: (-200k mt)
Catawba PM2: (-190k mt)
Calhoun PM5: (-80k mt)
Calhoun PM3/5: (-255k mt)Alma PM9:(+75k mt)
Calhoun inclusion in segment
1. The operating results of our Calhoun (Tennessee) tissue operations have been recorded in our tissue segment since April 1, 2018.
2. Excluding special items. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
3. Adjusted EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
4. Other postretirement benefit.
August 2, 2018 13RFP Q2 2018 RESULTS
PERFORMANCE METRICS« All-in » cash cost EBITDA per unit1
1. EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
EBITDA1
contribution from cogen
(US$mm)
Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18
9 10 13 9 9 9 12 11
137
174
88
57
(211)
(250)
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
(20)
0
20
40
60
80
100
120
140
160
180
Market pulp $/mt Wood products $/mbf
Newsprint $/mt Specialty papers $/st
Tissue $/st (right-hand scale)
610
340
496
644
1,762
0
250
500
750
1,000
1,250
1,500
1,750
2,000
200
300
400
500
600
700
800
900
1,000
Market pulp $/mt Wood products $/mbf
Newsprint $/mt Specialty papers $/st
Tissue $/st (right-hand scale)
August 2, 2018 14RFP Q2 2018 RESULTS
LIQUIDITY AND CASH FLOW
(US$mm) Q2 2018vs
Q1 2018vs
Q2 2017
Cash 6 -7 -38
Working capital3 604 -22 +24
Total debt 675 -104 -165
Interest 11 -2 -1
Available liquidity(US$mm)
2018 2017 2016
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
Total debt 675 779 789 832 840 881 762 727
Cash on hand 6 13 6 38 44 39 35 55
Available under revolving credit facilities 511 439 412 362 370 341 433 465
• Q2 net cash provided by operations
of $158mm
• Debt repayments of $105mm in Q2
• Liquidity of $517mm
• Net debt to capital ratio ↓ from 32%
to 28% in Q2
• Net debt to adjusted LTM1 EBITDA2
ratio ↓ to 1.3 in Q2
• $150mm of capital expenditures
expected in 2018
• Cumulative duty deposits of
$133mm
1. Last twelve months.
2. EBITDA is a non-GAAP financial measure. Refer to Appendices A and B for a definition and reconciliation of non-GAAP financial measures.
3. Excludes $60mm of supercalendered paper cash countervailing duty deposits reclassed to current assets in Q2 2018.
August 2, 2018 15RFP Q2 2018 RESULTS
PENSION
(US$mm) Q2’2018 2017 2016
Net pension liabilities 989 1,097 1,123
OPEB liabilities 164 172 172
Net pension and OPEB liabilities 1,153 1,269 1,295
U.S. GAAP discount rate at 12/311 N/A 3.6% 3.8%
• Net pension & OPEB liability ↓ $54 million in Q2
• Ongoing pension contributions and favorable foreign currency impact
(US$mm) 2018E Q2’2018 2017 2016
Pension contributions2 125 29 132 162
OPEB payments 15 4 11 13
Operating pension and OPEB costs 40 10 41 42
Non-op. pension and OPEB (credits)/costs3 (55) (12) (7) 8
Total pension and OPEB (credits)/costs (15) (2) 34 50
1. Pension plans.
2. Includes defined benefit and defined contribution plans.
3. Excluded from adjusted EBITDA.
0
5
10
15
20
25
30
35
Q1 2018 Q2 2018 Q3 2018 Q4 2018
Lo
st p
rod
uctio
n (0
00
's m
t)
20
30
14
August 2, 2018 16RFP Q2 2018 RESULTS
2018 SCHEDULED MARKET PULP OUTAGES1
1. Includes the outage related to the strategic capital expenditures at Saint-Félicien in Q3 and Q4.
0
5
10
15
20
25
30
35
Q1 2018 Q2 2018 Q3 2018 Q4 2018
Lo
st p
rod
uctio
n (0
00
's m
t)
20
30
14
2018 Estimate
2018 Actual
August 2, 2018 17RFP Q2 2018 RESULTS
OUTLOOK
Market
Pulp
• Optimistic through Q3 given sustained strength in demand
• Further publicly reported price increases in July and August
• 35-day outage for investment at Saint-Félicien will decrease production in
Q3-Q4; by end of 2019, annual capacity will increase by 27k mt
Tissue
• Focus is on improving overall productivity to support growing sales
volume
• Costs expected to remain challenged until a sustained level of daily
targeted production is achieved
• Price increases to be implemented on away-from-home products
Wood
Products
• Underlying market fundamentals will support healthy operating results in
the medium term, as housing starts continue their gradual recovery
Paper
• Reduced industry capacity has created a favorable market balance; solid
Q3 expected
• Publicly reported price increases in Q3 for all coated, uncoated
mechanical, and uncoated freesheet papers
• Making steady progress in the specialty paper operations optimization
APPENDIX A
August 2, 2018 19RFP Q2 2018 RESULTS
Three months ended June 30, 2018
(unaudited, in millions, except per share amounts) EPS
GAAP, as reported 121$ 72$ 0.77$
Adjustments for special items:
Foreign exchange loss - 1 0.01
Closure costs, impairment and other related charges 1 1 0.01
Net gain on disposition of assets (4) (4) (0.04)
Non-operating pension and OPEB credits - (12) (0.13)
Other expense, net - 2 0.02
Income tax effect of special items - 6 0.07
Adjusted for special items 118$ 66$ 0.71$
Three months ended June 30, 2017
(unaudited, in millions, except per share amounts) EPS
GAAP, as reported (48)$ (74)$ (0.82)$
Adjustments for special items:
Foreign exchange gain - (3) (0.03)
Closure costs, impairment and other related charges 65 65 0.72
Inventory write-downs related to closures 9 9 0.10
Start-up costs 7 7 0.08
Non-operating pension and OPEB credits - (1) (0.01)
Other income, net - (2) (0.02)
Income tax effect of special items - (4) (0.05)
Adjusted for special items 33$ (3)$ (0.03)$
RESOLUTE FOREST PRODUCTS INC.
RECONCILIATION OF OPERATING INCOME AND NET INCOME ADJUSTED FOR SPECIAL ITEMS
Net income
(loss)
Operating
income (loss)
Operating
income (loss)
Net income
(loss)
A reconciliation of our operating income, net income and net income per share reported before special items is presented in the
tables below. See Note 1 to the Reconciliations of Non-GAAP Measures regarding our use of non-GAAP measures contained in our
August 2, 2018, press release available on our website.
August 2, 2018 20RFP Q2 2018 RESULTS
Six months ended June 30, 2018
(unaudited, in millions, except per share amounts) EPS
GAAP, as reported 169$ 82$ 0.88$
Adjustments for special items:
Foreign exchange loss - 2 0.02
Closure costs, impairment and other related charges 1 1 0.01
Reversal of inventory write-downs related to closures (1) (1) (0.01)
Start-up costs 8 8 0.09
Net gain on disposition of assets (4) (4) (0.05)
Non-operating pension and OPEB credits - (25) (0.27)
Other expense, net - 8 0.09
Income tax effect of special items - 12 0.13
Adjusted for special items 173$ 83$ 0.89$
Six months ended June 30, 2017
(unaudited, in millions, except per share amounts) EPS
GAAP, as reported (57)$ (121)$ (1.34)$
Adjustments for special items:
Foreign exchange gain - (3) (0.03)
Closure costs, impairment and other related charges 72 72 0.80
Inventory write-downs related to closures 13 13 0.14
Start-up costs 15 15 0.16
Non-operating pension and OPEB credits - (4) (0.05)
Other income, net - (2) (0.02)
Income tax effect of special items - (3) (0.03)
Adjusted for special items 43$ (33)$ (0.37)$
Operating
income (loss)
Net income
(loss)
Operating
income (loss)
Net income
(loss)
August 2, 2018 21RFP Q2 2018 RESULTS
Three months ended June 30, 2018
(unaudited, in millions) Market pulp Tissue (2)
Wood products Newsprint
Specialty
papers
Corporate and
other Total
Net income (loss) including noncontrolling interests 41$ (10)$ 79$ 18$ 4$ (60)$ 72$
Interest expense 11 11
Income tax provision 47 47
Depreciation and amortization 8 5 7 17 12 5 54
EBITDA 49$ (5)$ 86$ 35$ 16$ 3$ 184$
Foreign exchange loss 1 1
Closure costs, impairment and other related charges 1 1
Net gain on disposition of assets (4) (4)
Non-operating pension and OPEB credits (12) (12)
Other expense, net 2 2
Adjusted EBITDA 49$ (5)$ 86$ 35$ 16$ (9)$ 172$
Three months ended June 30, 2017
(unaudited, in millions) Market pulp Tissue Wood products Newsprint
Specialty
papers
Corporate and
other Total
Net income (loss) including noncontrolling interests 16$ (1)$ 45$ (7)$ (7)$ (119)$ (73)$
Interest expense 12 12
Income tax provision 19 19
Depreciation and amortization 8 1 7 17 11 6 50
EBITDA 24$ -$ 52$ 10$ 4$ (82)$ 8$
Foreign exchange gain (3) (3)
Closure costs, impairment and other related charges 65 65
Inventory write-downs related to closures 9 9
Start-up costs 7 7
Non-operating pension and OPEB credits (1) (1)
Other income, net (2) (2)
Adjusted EBITDA 24$ -$ 52$ 10$ 4$ (7)$ 83$
RESOLUTE FOREST PRODUCTS INC.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
A reconciliation of our net income including noncontrolling interests to EBITDA and Adjusted EBITDA is presented in the tables below. See Note 1 to the Reconciliations of Non-GAAP
Measures regarding our use of the non-GAAP measures EBITDA and Adjusted EBITDA contained in our August 2, 2018, press release available on our website.
August 2, 2018 22RFP Q2 2018 RESULTS
Six months ended June 30, 2018
(unaudited, in millions) Market pulp Tissue (2)
Wood products Newsprint
Specialty
papers
Corporate and
other Total
Net income (loss) including noncontrolling interests 74$ (11)$ 132$ 14$ (3)$ (124)$ 82$
Interest expense 24 24
Income tax provision 78 78
Depreciation and amortization 15 6 15 33 24 14 107
EBITDA 89$ (5)$ 147$ 47$ 21$ (8)$ 291$
Foreign exchange loss 2 2
Closure costs, impairment and other related charges 1 1
Reversal of inventory write-downs related to closures (1) (1)
Start-up costs 8 8
Net gain on disposition of assets (4) (4)
Non-operating pension and OPEB credits (25) (25)
Other expense, net 8 8
Adjusted EBITDA 89$ (5)$ 147$ 47$ 21$ (19)$ 280$
Six months ended June 30, 2017
(unaudited, in millions) Market pulp Tissue Wood products Newsprint
Specialty
papers
Corporate and
other Total
Net income (loss) including noncontrolling interests 23$ (1)$ 65$ (11)$ (3)$ (192)$ (119)$
Interest expense 23 23
Income tax provision 48 48
Depreciation and amortization 16 2 16 33 23 11 101
EBITDA 39$ 1$ 81$ 22$ 20$ (110)$ 53$
Foreign exchange gain (3) (3)
Closure costs, impairment and other related charges 72 72
Inventory write-downs related to closures 13 13
Start-up costs 15 15
Non-operating pension and OPEB credits (4) (4)
Other income, net (2) (2)
Adjusted EBITDA 39$ 1$ 81$ 22$ 20$ (19)$ 144$
2. The operating results of our Calhoun (Tennessee) tissue operations have been recorded in our tissue segment since April 1, 2018.
APPENDIX B
August 2, 2018 24RFP Q2 2018 RESULTS
Resolute Forest Products Inc.
Financial and Operating Statistics (Page 1 of 5)
Variance
(in millions, except per share amounts and otherw ise indicated) First Second Third Fourth Total First Second Third Fourth Total checks
Income Statement Data
Sales 872$ 858$ 885$ 898$ 3,513$ 874$ 976$ 1,850$
Operating income (loss) (1) (9) (48) 46 53 42 48 121 169
Interest expense (11) (12) (13) (13) (49) (13) (11) (24)
Net income (loss) including noncontrolling interests (46) (73) 26 15 (78) 10 72 82
Net income (loss) attributable to noncontrolling interests 1 1 2 2 6 - - -
Net income (loss) attributable to Resolute Forest Products Inc. (47) (74) 24 13 (84) 10 72 82
Diluted net income (loss) per share attributable to Resolute Forest Products Inc. common shareholders (0.52)$ (0.82)$ 0.26$ 0.14$ (0.93)$ 0.11$ 0.77$ 0.88$
Dividends declared per common share -$ -$ -$ -$ -$ -$ -$ -$
Average diluted shares outstanding (in thousands) 90,195 90,344 91,639 93,032 90,474 92,999 93,197 93,125
Ending shares outstanding (in thousands) 89,751 89,751 89,798 90,197 90,197 90,315 90,342 90,342
Financial Position
Cash and cash equivalents 39$ 44$ 38$ 6$ 6$ 13$ 6$ 6$
Working capital (2) 630 580 608 618 618 626 664 664
Fixed assets, net 1,866 1,779 1,737 1,716 1,716 1,684 1,669 1,669
Total assets 4,335 4,171 4,232 4,147 4,147 4,122 4,025 4,025
Current portion of long-term debt 1 1 - 1 1 1 1 1
Long-term debt, net of current portion 880 839 832 788 788 778 674 674
Net debt (3) 842 796 794 783 783 766 669 669
Liquidity (4) 380 414 400 418 418 452 517 517
Total Resolute Forest Products Inc. shareholders' equity 1,655 1,590 1,607 1,599 1,599 1,615 1,691 1,691
Noncontrolling interests 19 20 22 1 1 1 1 1
Total equity 1,674 1,610 1,629 1,600 1,600 1,616 1,692 1,692
Cash Flow Information
Cash flows provided by (used in) operations (39)$ 99$ 39$ 59$ 158$ 62$ 158$ 220$
Cash invested in fixed assets (69) (47) (20) (28) (164) (25) (28) (53)
Dispositions of assets - - 3 18 21 - 2 2
Decrease (increase) in countervailing duty cash deposits on supercalendered paper (5) (7) (5) (5) (22) (5) (6) (11)
Decrease (increase) in countervailing and anti-dumping duty cash deposits on softwood lumber - (4) (14) (8) (26) (14) (27) (41)
Decrease (increase) in countervailing duty cash deposits on uncoated groundwood paper - - - - - (2) (4) (6)
Cash flows provided by (used in) investing activities (75) (54) (39) (24) (192) (46) (63) (109)
Net borrowings (repayments) under revolving credit facilities 118 (41) (7) (51) 19 (9) (105) (114)
Cash flows provided by (used in) financing activities 118 (41) (8) (66) 3 (10) (105) (115)
2017 2018
August 2, 2018 25RFP Q2 2018 RESULTS
Resolute Forest Products Inc.
Financial and Operating Statistics (Page 2 of 5)
(in millions, except per unit items and otherw ise indicated) First Second Third Fourth Total First Second Third Fourth Total
Sales
Market pulp 209$ 213$ 227$ 262$ 911$ 257$ 264$ 521$
Tissue (5) 20 20 21 20 81 22 35 57
Wood products 177 197 219 204 797 209 254 463
Newsprint 226 201 199 216 842 198 230 428
Specialty papers 240 227 219 196 882 188 193 381
Total sales 872$ 858$ 885$ 898$ 3,513$ 874$ 976$ 1,850$
Shipments to Third Parties (thousands of units)
Market pulp (mt) 353 336 348 388 1,425 362 353 715
Tissue (st) (5) 13 13 14 13 53 15 23 38
Wood products (mbf) 505 509 531 466 2,011 455 494 949
Newsprint (mt) 443 397 388 410 1,638 355 393 748
Specialty papers (st) 364 349 333 297 1,343 279 275 554
Average Transaction Price per Unit
Market pulp ($/mt) 593$ 632$ 650$ 678$ 639$ 710$ 747$ 728$
Tissue ($/st) (5) 1,543 1,541 1,492 1,542 1,529 1,480 1,551 1,523
Wood products ($/mbf) 350 386 413 438 396 459 514 488
Newsprint ($/mt) 510 509 511 525 514 558 584 571
Specialty papers ($/st) 659 651 659 660 657 675 701 688
20182017
August 2, 2018 26RFP Q2 2018 RESULTS
Resolute Forest Products Inc.
Financial and Operating Statistics (Page 3 of 5)
(in millions, except per unit items and otherw ise indicated) First Second Third Fourth Total First Second Third Fourth Total
Operating Income (Loss)
Market pulp 7$ 16$ 19$ 37$ 79$ 33$ 41$ 74$
Tissue (5) - (1) (3) (2) (6) (1) (10) (11)
Wood products 20 45 64 57 186 53 79 132
Newsprint (4) (7) (6) (6) (23) (4) 18 14
Specialty papers 4 (7) 7 (13) (9) (7) 4 (3)
Corporate and other (1) (36) (94) (35) (20) (185) (26) (11) (37)
Total operating income (loss) (1)(9)$ (48)$ 46$ 53$ 42$ 48$ 121$ 169$
Selling, General and Administrative Expenses
Market pulp 8$ 8$ 9$ 7$ 32$ 9$ 9$ 18$
Tissue (5) 2 1 2 1 6 1 3 4
Wood products 6 7 7 6 26 7 8 15
Newsprint 10 8 10 10 38 9 9 18
Specialty papers 7 6 7 7 27 7 6 13
Corporate and other (1) 9 7 8 17 41 10 7 17
Total selling, general and administrative expenses (1)42$ 37$ 43$ 48$ 170$ 43$ 42$ 85$
Operating Cost per Unit
Market pulp ($/mt) 575$ 583$ 595$ 583$ 584$ 619$ 631$ 625$
Tissue ($/st) (5) 1,592 1,579 1,700 1,697 1,642 1,585 1,973 1,822
Wood products ($/mbf) 310 299 291 318 304 342 355 349
Newsprint ($/mt) 519 525 526 540 528 568 538 552
Specialty papers ($/st) 647 673 639 703 664 698 688 693
Operating Cost per Unit, Excluding Depreciation and Amortization
Market pulp ($/mt) 551$ 561$ 572$ 565$ 562$ 600$ 610$ 604$
Tissue ($/st) (5) 1,504 1,489 1,593 1,614 1,550 1,508 1,762 1,662
Wood products ($/mbf) 293 284 276 299 287 325 340 333
Newsprint ($/mt) 483 484 485 498 488 524 496 508
Specialty papers ($/st) 615 640 605 667 630 657 644 650
Product Inventory (thousands of units)
Market pulp (mt) 92 94 100 89 89 91 108 108
Tissue (st) (5) 8 8 8 11 11 11 8 8
Wood products (mbf) 147 125 122 124 124 140 128 128
Newsprint (mt) 107 114 98 78 78 93 85 85
Specialty papers (st) 100 93 86 66 66 68 70 70
2017 2018
August 2, 2018 27RFP Q2 2018 RESULTS
Resolute Forest Products Inc.
Financial and Operating Statistics (Page 4 of 5)
(in millions) First Second Third Fourth Total First Second Third Fourth Total
Net Income (Loss) Including Noncontrolling Interests
Market pulp 7$ 16$ 19$ 37$ 79$ 33$ 41$ 74$
Tissue (5)- (1) (3) (2) (6) (1) (10) (11)
Wood products 20 45 64 57 186 53 79 132
Newsprint (4) (7) (6) (6) (23) (4) 18 14
Specialty papers 4 (7) 7 (13) (9) (7) 4 (3)
Corporate and other (73) (119) (55) (58) (305) (64) (60) (124)
Total net income (loss) including noncontrolling interests (46)$ (73)$ 26$ 15$ (78)$ 10$ 72$ 82$
Interest Expense 11$ 12$ 13$ 13$ 49$ 13$ 11$ 24$
Income Tax Provision (Benefit) 29$ 19$ 15$ 21$ 84$ 31$ 47$ 78$
Depreciation and Amortization
Market pulp 8$ 8$ 8$ 7$ 31$ 7$ 8$ 15$
Tissue (5) 1 1 2 1 5 1 5 6
Wood products 9 7 9 8 33 8 7 15
Newsprint 16 17 16 17 66 16 17 33
Specialty papers 12 11 11 11 45 12 12 24
Corporate and other 5 6 6 7 24 9 5 14
Total depreciation and amortization 51$ 50$ 52$ 51$ 204$ 53$ 54$ 107$
EBITDA (6)
Market pulp 15$ 24$ 27$ 44$ 110$ 40$ 49$ 89$
Tissue (5) 1 - (1) (1) (1) - (5) (5)
Wood products 29 52 73 65 219 61 86 147
Newsprint 12 10 10 11 43 12 35 47
Specialty papers 16 4 18 (2) 36 5 16 21
Corporate and other (28) (82) (21) (17) (148) (11) 3 (8)
Total EBITDA 45$ 8$ 106$ 100$ 259$ 107$ 184$ 291$
Special Items (6)
Foreign exchange (gain) loss -$ (3)$ (7)$ 1$ (9)$ 1$ 1$ 2$
Closure costs, impairment and other related charges (1) 7 65 8 2 82 - 1 1
(Reversal of) inventory write-downs related to closures 4 9 11 - 24 (1) - (1)
Net (gain) loss on disposition of assets - - (2) (13) (15) - (4) (4)
Non-operating pension and OPEB costs (credits) (1) (3) (1) (2) (1) (7) (13) (12) (25)
Start-up costs 8 7 3 9 27 8 - 8
Other (income) expense, net - (2) 1 4 3 6 2 8
Total special items 16$ 75$ 12$ 2$ 105$ 1$ (12)$ (11)$
Adjusted EBITDA (6)
Market pulp 15$ 24$ 27$ 44$ 110$ 40$ 49$ 89$
Tissue (5) 1 - (1) (1) (1) - (5) (5)
Wood products 29 52 73 65 219 61 86 147
Newsprint 12 10 10 11 43 12 35 47
Specialty papers 16 4 18 (2) 36 5 16 21
Corporate and other (12) (7) (9) (15) (43) (10) (9) (19)
Total adjusted EBITDA 61$ 83$ 118$ 102$ 364$ 108$ 172$ 280$
20182017
August 2, 2018 28RFP Q2 2018 RESULTS
Resolute Forest Products Inc.
Financial and Operating Statistics (Page 5 of 5)
Notes
We believe that using these non-GAAP measures is useful because they are consistent with the indicators management uses internally to measure the Company’s performance, and it allows the reader to more easily compare our ongoing operations
and financial performance from period to period. EBITDA and adjusted EBITDA are internal measures, and therefore may not be comparable to those of other companies. These non-GAAP measures should not be viewed as substitutes to financial
measures determined under GAAP in our consolidated statements of operations in our filings with the SEC.
Adjusted EBITDA means EBITDA, excluding special items, such as foreign exchange gains and losses, closure costs, impairment and other related charges, inventory write-downs related to closures, start-up costs, gains and losses on disposition of
assets, non-operating pension and OPEB costs and credits and other charges or credits. Special items are allocated to corporate and other.
5 The operating results of our Calhoun (Tennessee) tissue operations, previously recorded under corporate and other, have been recorded in our tissue segment since April 1, 2018.
6 EBITDA by reportable segment is calculated as net income (loss) including noncontrolling interests from the consolidated statements of operations, allocated to each of our reportable segments (market pulp, tissue, wood products, newsprint and
specialty papers) in accordance with FASB ASC 290, “Segment Reporting,” adjusted for depreciation and amortization. EBITDA for corporate and other is calculated as net income (loss) including noncontrolling interests from the consolidated
statements of operations, after the allocation to reportable segments, adjusted for interest expense, income taxes, and depreciation and amortization.
4 We define liquidity as cash and cash equivalents and availability under our credit facilities.
2 We define working capital as current assets less current liabilities excluding cash and cash equivalents and debt.
3 We define net debt as total debt less cash and cash equivalents.
1 In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires employers that present a measure of operating income in their statements of
earnings to disaggregate and present only the service cost component of net periodic pension cost and net periodic OPEB cost in operating expenses (together with other employee compensation costs arising during the period). The other components
of the net periodic pension cost and net periodic OPEB cost (or “Non-operating pension and OPEB costs”) are reported separately outside any subtotal of operating income. This update is effective retrospectively for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years. We adopted this ASU on January 1, 2018.
AUGUST 2, 2018
RESOLUTE FOREST
PRODUCTS
Q2 2018 RESULTS